by Bill McBride on 10/01/2009 08:53:00 AM
Thursday, October 01, 2009
Note: A large portion of the increase in durable goods consumption in August was due to cash-for-clunkers, however there was also a significant increase in non-durable goods.
From the BEA: Personal Income and Outlays, August 2009
Personal income increased $19.3 billion, or 0.2 percent, and disposable personal income (DPI) increased $15.5 billion, or 0.1 percent, in August, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $129.6 billion, or 1.3 percent.Click on graph for large image.
Real PCE -- PCE adjusted to remove price changes -- increased 0.9 percent in August, compared with an increase of 0.2 percent in July. Purchases of durable goods increased 5.8 percent, compared with an increase of 1.8 percent. Reflecting the impact of the federal CARS program (popularly called "cash for clunkers"), purchases of motor vehicles and parts accounted for most of the August increase in purchases of durable goods and more than accounted for the July increase.
Personal saving -- DPI less personal outlays -- was $324.1 billion in August, compared with $436.0 billion in July. Personal saving as a percentage of disposable personal income was 3.0 percent in August, compared with 4.0 percent in July.
This graph shows the saving rate starting in 1959 (using a three month centered average for smoothing) through the August Personal Income report. The saving rate was 3.0% in August.
This decline in the saving rate was probably temporary, and I expect the saving rate to continue to rise.
The following graph shows real Personal Consumption Expenditures (PCE) through August (2005 dollars). Note that the y-axis doesn't start at zero to better show the change.
The quarterly change in PCE is based on the change from the average in one quarter, compared to the average of the preceding quarter.
The colored rectangles show the quarters, and the blue bars are the real monthly PCE.
The July and August numbers suggest PCE will grow at over 3% (annualized rate) in Q3, however I expect September to be much lower. So I expect a 2% increase in Q3 PCE.
Note that PCE declined sharply in Q3 and Q4 2008 - the cliff diving - and was been relatively flat in Q1 and Q2 2009. Auto sales gave a boost to PCE in Q3, but in general PCE will probably remain weak into 2010 as households continue to repair their balance sheets.
Posted by Bill McBride on 10/01/2009 08:53:00 AM